The passage of Congress’s major budget and tax legislation, titled the One Big Beautiful Bill Act (OBBBA), sets up a frightening future in our commonwealth. The law will take health coverage and food assistance from hundreds of thousands of Kentuckians trying to build better lives for themselves and their families. It will increase hardship, worsen health and weaken our economy. And it does so to pay for just a portion of tax cuts that go overwhelmingly to the wealthy and powerful.
Potential harm includes:
- 210,000 Kentuckians becoming uninsured because of loss of Medicaid, 47,000 more losing coverage through kynect, and still more facing increased out-of-pocket healthcare costs.
- $12.3 billion cut from Medicaid in rural Kentucky alone over the next 10 years — more than any other state — putting 35 rural hospitals at risk of closure.
- Supplemental Nutrition Assistance Program (SNAP) benefits reduced for all 562,000 Kentuckians receiving it, with an estimated 50,000 newly at risk of losing SNAP entirely.
- A federal cost shift that could require the state budget to cover hundreds of millions of dollars a year to sustain SNAP, pitting food assistance against investments in schools, health care, infrastructure and other needs.
- Eliminated jobs in clean energy and cuts to Pell Grants and student loans.
- Tax cuts overwhelmingly skewed to the wealthy, with 64% of benefits going to the wealthiest 20% of Kentuckians and the richest 1% receiving $46,420 annually — more than many Kentucky households live on each year.
Moving forward, Kentuckians should understand the full impact of this legislation. And as its many harms hit the commonwealth in the coming years, state and federal leaders must do everything they can to mitigate the damage and work to roll back the harms.
Massive cuts to Medicaid will result in coverage losses, reduced revenue for providers, and cost-shifts to the state budget
The largest budget cut in the OBBBA by far is to Medicaid. The law cuts over $1 trillion from the program over 10 years, larger than all previous Medicaid cuts combined and a $38 billion federal cut to Kentucky’s Medicaid program over 10 years. Cuts of this magnitude will result in coverage losses for an estimated 210,000 Kentuckians, reduced health services and economic damage that will be felt for years into the future. Many of the policies that drive these cuts take aim at the expansion of Medicaid eligibility to all low-income adults and will undo much of the success of that coverage, including improved health outcomes and a lower uninsured rate. Other aspects of the law directly cut payments to health care providers or shift the cost of provider payments to states. Finally, other changes increase health care costs for individuals and will reduce the amount of care people will seek.
Coverage losses through increased red tape
The largest cut to Medicaid comes from a new work reporting requirement. Starting Dec. 31, 2026, adults ages 19 to 64 will need to prove they are working or active in a qualified activity for 80 hours per-month to stay covered by Medicaid. While there are exemptions for this policy, 149,000 Kentuckians are projected to lose coverage based on the experience in Arkansas.
Another way these cuts take shape is by reducing enrollment through increased eligibility checks and more difficult enrollment processes. Kentuckians enrolled through Medicaid expansion will need to complete a full redetermination process every six months instead of every year and will not be able to enroll under a Biden-era rule that would have made applying and redetermining eligibility easier. When Kentucky restarted its redetermination process following a pandemic-era ban on disenrollments, 15% of Kentucky’s Medicaid population lost coverage due to procedural errors including late or missing paperwork, typos, or administrative delays in processing information. Additionally, the OBBBA will no longer cover some immigrants who are lawfully residing here.
Revenue losses through cuts in provider payments
Health care providers will see direct cuts to their Medicaid payments because of a cap on State Directed Payments and a shorter look-back period for retroactive eligibility. State Directed Payments are supplemental payments made to ambulance providers, university hospitals and private hospitals that increase reimbursement rates to the average commercial insurance rate. In the 2026 fiscal year, those payments will make up more than $5.4 billion of Kentucky’s $20.1 billion Medicaid program. Starting in 2028, those payments will be reduced by 10% each year until reaching the Medicare payment limit – cutting the private hospital State Directed Payments by a massive 86% and eliminating the supplemental payments to university hospitals.
Additionally, hospitals can currently receive reimbursement for care provided to individuals before they’re on Medicaid if they eventually do qualify for that coverage. This policy is known as retroactive eligibility. Under this bill, the coverage will be reduced from a three-month look-back to a two-month look-back for traditionally eligible enrollees and a one-month look-back for expansion-eligible enrollees, resulting in fewer people being eligible.
The bill also shifts significant costs to the state by reducing how much of the state’s match can be met through provider payments. Funding Medicaid is a shared state and federal partnership, with the federal government paying 72% of the cost of traditional Medicaid and 90% of the expansion group. Kentucky uses taxes on various health care providers to help pay for its share as well as to help cover the cost of State Directed Payments and other initiatives. By reducing the allowable provider tax rate to 3.5%, ambulances, hospitals, and providers of the Supports for Community Living waiver will all see their provider taxes drop. The state could increase General Fund spending to make up some portion of the difference, but replacing all those lost dollars would require massive new state investments that are out of reach.
Cost increases and coverage losses for those who have insurance
For those who are able to keep their coverage, using it will become more expensive. Starting Oct. 1, 2028, Medicaid-covered adults earning between 100% and 138% of the Federal Poverty Level ($15,650-$21,600 for an individual) will need to pay copays of up to $35 per-service, annually capped at 5% of their income. There are some exceptions to this policy, including for primary care and substance use disorder treatment. Cost savings from copays don’t come from the value of the copays themselves, but rather by making people less likely to go to the doctor. A large body of research shows that copays reduce health care utilization, even for children.
Finally, Congress erected new barriers for enrollment in marketplace coverage and failed to continue the enhanced subsidies that have been in place for the past four years. In doing so, an estimated 47,000 Kentuckians who would have purchased insurance on kynect will likely become uninsured.
The result of these unprecedented cuts to health care is that roughly a quarter million Kentuckians will become uninsured, doubling our state’s uninsured rate. Ultimately, that will lead to one in 10 Kentuckians lacking the ability to see a doctor or take needed medicine without significant financial hardship. The repercussions of reduced coverage, along with the direct cuts to hospital payments, puts 35 financially vulnerable rural hospitals at a higher risk of closure. Rural Kentucky stands to lose $12.3 billion in Medicaid spending, nearly double any other state’s rural Medicaid losses. Kentucky’s health already ranks 41st out of all 50 states. Economic and health consequences will extend beyond hospitals, as workers will likely lose the coverage that allows them to work in the first place, and industries like retail will see less spending from reduced jobs and income in communities.
Law introduces red tape for SNAP participants and shifts costs to the state budget for the first time
The OBBBA includes the largest cut in history to SNAP food assistance. The cut requires states to pay a significant portion of the cost of SNAP benefits, increases its share of the cost of administering the program and expands ineffective reporting requirements, putting food assistance at risk for older adults, parents, veterans, people experiencing homelessness and former foster youth. In sum, these changes will reduce or eliminate food assistance for many of the 562,125 Kentuckians who get help with groceries through SNAP at a time when food insecurity in Kentucky is on the rise and cost of groceries has grown 23% since 2021.
Takes away food assistance by expanding work reporting
Currently, work reporting requirements apply to people participating in SNAP who don’t have children at home or a documented qualifying disability, and who are between the ages of 18 and 54. In order to qualify to receive SNAP for more than three months within a 36-month period, many of these individuals must verify each month they worked at least 80 hours per-month or engaged in some other qualifying activity. For the nearly 30 years these requirements have been in place, they have not been shown to significantly improve work or employment outcomes, though they have been very effective at reducing SNAP participation. Over 33,300 Kentuckians lost their food assistance when this policy was in place between January 2018 and March 2020.
In the new law, the paperwork requirement has been expanded to older adults 55 to 64 years and families with kids over 14 years old, putting about 50,000 additional Kentuckians at risk of losing food assistance. It also significantly reduces the number of areas where SNAP participants were previously exempt from the requirement due to poor regional job availability. In addition, the bill strips exemptions from veterans, people experiencing homelessness and former foster youth who will now have to complete the additional paperwork requirements.
Shifts tens-to-hundreds of millions of dollars annually to the Kentucky state budget
For the first time in SNAP history, Kentucky will be required to pay a portion of the program’s costs starting in the 2028 fiscal year. The state’s cost share will depend on what is known as the “error rate” (how accurate each state is at eligibility and benefit determinations for applicants). In 2024, Kentucky had an error rate of 9.11% which would have resulted in a 10% cost share, or $115,020,000 for the year. Our initial costs in 2028 will be determined by the 2025 or 2026 error rate and will likely be a 5% to 15% share or a cost between $57,510,000 and $172,530,000 based on current levels of SNAP participation. Kentucky must also increase its portion of the cost of administering SNAP by 50% starting in 2026, an estimated additional burden of $66.8 million. That makes total new SNAP costs to the state budget as much as $239 million in 2028, an amount that could be much higher if SNAP enrollment spikes by that time due to an economic downturn.
The reliance on a volatile error rate makes it difficult for states to budget for the match requirement, pitting food assistance against other vital and urgent services. By the time the cost share goes into effect in 2028, error rates will likely have increased due to the administrative burden of the many changes to SNAP and other programs.
All state agencies administering SNAP will be under pressure to implement administrative changes to reduce the error rate and therefore costs. This element of the law creates perverse incentives to enact policies that create barriers to participation and avoid enrolling applicants with any “risk” to the error rate – as disqualifying an eligible applicant doesn’t impact error rates but determining incorrect benefits or inaccurate verification or documentation does.
Ultimately, the state will have to decide either to find the additional resources in its current budget to pay these new SNAP costs — which could mean cutting funding for schools, healthcare, infrastructure and other needs — make additional cuts to the program, raise taxes, or end its SNAP program entirely.
Ends food assistance for people with lawful residing immigration status
Certain kinds of immigrants who are granted legal status are no longer eligible for SNAP under OBBBA. People with Temporary Protected Status (like those fleeing war in Afghanistan, Sudan and Ukraine) and refugees, who have long qualified for SNAP under the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, are now banned from the program. While Cuban and Haitian entrants and legal residing immigrants in accordance with the Compacts of Free Association were carved out, an estimated 7,000 legally present immigrants residing in Kentucky would lose their food assistance.
Prevents SNAP from keeping pace with the cost of healthy diet and increases paperwork to prove household expenses
Previously, households that received energy assistance would automatically receive a Standard Utility Allowance deduction, which increases the amount they receive through SNAP. The new law immediately ends this administrative simplification for all households with energy assistance except for those with elderly residents or people with disabilities. All other households, including families with children, will have to submit additional paperwork or see reductions in benefits. Additionally, the bill reduces benefits by preventing internet expenses from being counted as a deductible utility.
The bill restricts the benefit adjustments for SNAP, known as the Thrifty Food Plan, in a way that will make it out of step with real cost growth for healthy foods and slow the growth of benefits over time. In 2021, the Thrifty Food Plan allowed USDA to adjust benefit amounts to more accurately reflect the costs of a healthy diet, resulting in a modest but meaningful increase in food assistance. The next Thrifty Food Plan adjustment would have been in 2026. Without this adjustment and future changes, benefit amounts will fall farther behind the cost of affording a healthy diet over time. The USDA will now have to recalculate benefit amounts based on the Consumer Price Index (CPI).
Compounding this blow to healthy eating, the bill also eliminates Snap Nutrition Education – known as “SNAP Ed”— a program that teaches SNAP participants how to use their SNAP benefits to prepare nutritious meals at home. SNAP Ed, administered by University of Kentucky Cooperative Extension Service, has benefited tens of thousands of Kentucky households and reaches hundreds of thousands of Kentuckians each year.
Cuts to education aid will make college more expensive and increase the burden of student debt
The changes to Pell Grants and student loans in the law will make it even more difficult for Kentuckians to afford college and pay back loans when they must borrow. Fewer students will qualify for Pell, which around a third of Kentucky college students currently receive, because the OBBBA narrows the financial need eligibility requirements and students will no longer qualify if they have other grants and scholarships that cover the calculated cost of attendance. Students have previously been able to use Pell to meet basic needs such as transportation, health care and child care.
In addition, there will be fewer student loan repayment options, exacerbating the already-severe student debt crisis in Kentucky. Moving forward, there will be only two allowable payment plans for loans – a new standard repayment plan with fixed monthly payments and fixed terms ranging from 10 to 25 years and a new income-based plan with less favorable terms than the existing income-based plan. In 2020, 20% of Kentucky’s more than 600,000 borrowers, covering 32% of the total amount of federal student loan debt owed in the state at that time, were on the existing income-driven repayment plans that forgave the remaining balance after a period of 10 to 25 years. In contrast, the new plan will forgive the balance after 30 years, and one analysis found that the average borrower could pay $2,929 more per-year as a result.
The OBBBA also eliminates the Economic Hardship Deferment and Unemployment Deferment, and limits federal student loan borrowing options for Kentuckians pursuing graduate school or supporting their children in doing so. It institutes aggregate and annual borrowing caps for graduate and professional students and for Parent Plus loans. And the OBBBA eliminates the Graduate PLUS student loan program, which has been used to cover educational expenses not covered by other financial aid.
The law creates a national private school voucher program states opt into, a policy that Kentuckians voted to reject in Amendment 2 last year. In OBBBA’s national voucher program, all but the wealthiest families are eligible for vouchers, those who earn up to 300% of median income in their area including kids already attending private schools. When wealthy individuals donate to intermediary organizations that pay for private and religious schools, they receive up to $1,700 in dollar-for-dollar tax credits, or an amount much more generous than for other charitable donations. There is no cap on the amount the federal government will spend on this program and it could cost between $25 billion and $51 billion a year.
Law ends job-creating clean energy incentives
Kentucky is one of the top states for clean energy job growth in recent years driven by new investments contained in the federal Inflation Reduction Act passed in 2022. But the OBBBA cuts $499 billion of the tax credits driving these investments over the next 10 years. Those cuts will increase the cost of installing low-cost clean energy and cause the cancellation of projects currently planned across the country.
In September, the law will end the $7,500 electric vehicle (EVs) tax credit intended to spur sales of EVs like those powered by the batteries that will be produced at the Ford Blue Oval SK plants in Hardin County and multiple other locations in the state. By the end of 2025, the OBBBA ends home energy credits for rooftop solar, electric heat pumps and other installations that increase energy efficiency and lower electricity bills in homes. And the law ends a tax incentive covering at least 30% of costs for large wind and solar projects unless they begin construction by summer 2026.
According to Energy Innovation, Kentucky is one of the five states that will experience the biggest harms in terms of energy costs and job losses weighted by population because of the OBBBA. In Kentucky, their model predicts 11 gigwatts less in generation capacity from wind, solar and batteries in 2035, electricity rates that are 48% to 110% higher in that year, and the loss of 12,000 jobs in 2030.
Tax cuts overwhelmingly favor the wealthy while providing only small tax cuts – if any – to Kentucky families
The benefits of tax cuts in the OBBBA favor the richest people and provide working-class Kentuckians with relatively small tax cuts that would largely be offset by newly imposed tariffs. The poorest 20% of Kentuckians will only receive 1% of the share of total tax cuts, while the richest 20% will receive 64% of the cuts.
The OBBBA also increases the national debt by at least $3.4 trillion across the next decade.
The bill:
- Makes permanent the 2017 Tax Cuts and Jobs Act income tax cuts and bracket changes that largely benefit the richest fifth of taxpayers, with those benefits especially concentrated in the top 1%. This change is the heftiest component of the bill, coming at a cost of about $3.8 trillion in federal tax revenue.
- Makes permanent the business pass-through deduction, which is heavily skewed toward super-wealthy investors and business owners.
- Increases the estate tax exemption for estates to over $15 million for individuals, despite the tax already applying to a historically small group of the ultra-wealthy.
- Reinstates corporate tax subsidies and make permanent a tax break for the foreign profits of American corporations.
- Quadruples the individual State and Local Tax deduction from $10,000 to $40,000 for five years; this deduction disproportionately benefits the wealthy and is of declining use in Kentucky due to the state’s legislature’s deep cuts in the individual income tax.
- Includes a permanent increase in the Child Tax Credit (CTC) from $2,000 to $2,200 but excludes the lowest-income kids and some legally residing immigrant children.
Some of the provisions advertised as appealing to working class people or seniors, such as no tax on tips and no tax on overtime, actually provide little benefit. The tips deduction will only apply to the federal income tax and would generate little savings for tipped workers who earn little more than the standard deduction. The amount of people who will benefit from the overtime deduction is minimal, as only about 8% of hourly workers regularly work overtime in the U.S. The OBBBA includes an additional $6,000 tax deduction for those over the age of 65; however, many older Americans, including more than the 105,000 Kentucky seniors living in poverty, will not be eligible to receive any benefit if their taxable income is below the enhanced standard deduction, or because common income sources like Social Security benefits are non-taxable for most older adults.
As many as 285,000 children in Kentucky would get nothing from the $200-per-child increase in the CTC because their parents — who work important but low-paid jobs — don’t earn enough. It would also exclude up to 6,000 Kentucky children from the credit entirely due to its requirement of one filing parent to have a Social Security number.
While the legislation is touted as an effort to put money back into everyday Americans’ wallets, individuals earning the average income of around $35,000 in Kentucky could expect an annual tax cut of about $600 (before taking into account any harm from loss of Medicaid, SNAP or higher household costs due to tariffs). Meanwhile, the wealthiest Kentuckians could expect an annual kickback of over $46,000 — enough in one year alone to buy a new car or put a down payment on a house.
